Fast-tracking sustainability: ‘Acknowledge that it’s hard’
Australia’s financial system is reshaping towards a resilient and inclusive future, but there’s still much to do, industry experts agreed at the launch of ASFI’s latest Progress Tracker.
In 2020, the Australian Sustainable Finance Institute (ASFI) published a roadmap aimed at steering the country’s financial system toward the creation of a resilient and prosperous future. Its 37 recommendations sought to build sustainable finance markets, support community resilience through more socially responsible lending practices and embed sustainability interests within governance structures. How much has been achieved in two years?
ASFI’s Progress Tracker provides a snapshot of the state of sustainable finance in Australia and assesses the advances towards implementing each of the 37 roadmap recommendations.
Presented at the inaugural Australian Sustainable Finance Summit in October, it shows remarkable headway over the past 12 months, but significant work is required to align the Australian financial system with a sustainable, resilient and inclusive nation, with an average score of 2 out of 5 across all recommendations.
The Australian Sustainable Finance Summit brought together leaders from across the public, private and not-for-profit sectors to build understanding and drive progress on key issues, including sustainable finance policy and regulation, finance sector leadership, and natural capital.
In presenting the Progress Tracker results, ASFI’s Senior Policy and Program Manager Purdie Bowden noted that recommendations such as the development of an Australian sustainable finance taxonomy are well underway, but much work remains for other recommendations, such as reflecting the perspectives and rights of Aboriginal and Torres Strait Island people through the financial system.
“We remain at the very early stages of this journey, and there is significant work to accelerate progress consistent with the urgency of the challenges before us,” she said.
The state of sustainable finance
The Progress Tracker presentation was followed by a panel discussion on the state of sustainable finance in Australia. Moderated by Mark Spicer, Partner, ESG and Responsible Investment at KPMG, panel members included Michael Chen, Executive Director, Head of ESG at Westpac, who shared key developments in sustainability across the banking sector.
Other panel members included Viv Bower, Group Executive Corporate Affairs and Sustainability at QBE, who discussed the adoption of ESG principles into insurance underwriting frameworks. Alison Chan, Investment Director - Sustainable Finance at Australian non-bank corporate lender and alternative asset manager, Metrics Credit Partners, highlighted a growth in sustainability themed investment across the country. Kristian Fok, CIO of Cbus and Chair of ASFI also joined the panel and noted an increase in public-private sustainable investments, as well as the need for Australia to “run very fast” to keep up with international progress in sustainable finance and regulation.
Growth in green banking
Sustainability is an increasing focus of boardroom agendas as C-suites grapple with the complexity of the net-zero transition.
“This is the case for banks and for our institutional and corporate customers,” said Chen. “We’re seeing senior management teams asking questions like, ‘How can I get my head around long-term targets if our financial forecasting is for a couple of quarters ahead?’ or ‘What are the trade-offs for making long-term capital-intensive investments where we don't see the financial or emissions-reduction returns many years out?’.”
Chen also highlighted the challenge of stakeholder management. “There’s a very vocal cohort saying that companies are not going fast enough and another cohort saying they’re going too fast. So, how do we calibrate the external messaging and internal strategy? These aren’t easy questions, and that’s why management teams and boards are now spending much more time on sustainability issues.”
Along with governance issues, Chen noted strategic developments across the banking sector, including the formation of the UN-convened Net-Zero Banking Alliance and the Glasgow Financial Alliance for Net Zero (GFANZ)
“It’s amazing to think that they were set up less than two years ago and there are now more than a hundred banks have committed to setting net-zero targets,” said Chen.
Westpac joined the Net-Zero Banking Alliance in July this year and Chen outlined its four sector targets across upstream oil and gas, power generation, cement production and thermal coal mining. He also noted a tightening of the bank’s emissions-intensive sector lending criteria, as well as a shift in customer engagement on sustainability goals.
“The only way we can meet our financed emissions targets is if our clients meet their targets, so the shape and texture of how we partner with our clients has changed, namely around engagement with our ESG and sector experts and how we provide finance.”
Chen also noted an “encouraging boom” in sustainable finance, including instruments such as sustainability linked loans and bonds, as well as the ways in which traditional finance is enabling customers to meet their green goals.
“If a customer's looking to upgrade its fleet to be electric, for instance, how do we help them with leasing structures and asset finance? Or how do we structure a deal with a greenfield renewables developer to help them attract more capital? There’s a range of ways the banking sector is helping clients through finance structures.”
The reporting challenge
Banks have become more adept at quantifying climate-related impacts on their balance sheet, thanks to prudential guidance such as APRA’s CPG 229 Climate Change Financial Risks, released in April last year, as well as its Climate Vulnerability Assessment, which evaluates the extent of financial risks that large banks face due to climate change.
However, Chen also pointed to challenges around data and a lack of uniformity in the way sustainability is tracked and reported. “I noticed that there’s funding [in the latest Federal Budget] for Treasury and the Accounting Standards Board to look at climate reporting, which is an important development, along with the work of ASFI Taxonomy Project,” said Chen, “So, we’ll continue to see more consistent, comparable reporting in the coming years.”
Chen told the panel he was encouraged by the weight of capital flowing into sustainable projects and the increasing focus on setting net-zero targets, “but there’s a lot of work to be done”, and complexity around Scope 3 emissions is adding to the challenge.
“We need to acknowledge that it’s hard,” he stated. “If you export iron ore, for instance, but your customers don’t report on their emissions, you’re left with Scope 3 emissions based on proxies and estimations and you have no control over how these proxies are set.
“We shouldn’t let the perfect be the enemy of the good, but the fact is that the data is not there yet.”
The road ahead
At the conclusion of the discussion, Spicer asked panel members to name a key area of progress they’d like to see a year from now. He nominated his own wish for “mandated, consistent climate reporting across industry that's internationally interlinked.”
Fok’s wish was for “industry frameworks for transition pathways”.
“This would create more clarity around why you might be investing in something that may have not a long-term future, but that’s actually critical along the way to transition,” he said.
Skills development is high on Chan’s wish list. “Sustainability is everybody's job, so we need to build skills,” she said.
Bower would like to see sustainability embedded at leadership levels. “It needs to come from the top,” she said. “That includes government, financial services and corporates.”
Chen nominated the development of a vital tool to help direct capital into projects and investments that will accelerate Australia’s transition to net-zero.
“We need the taxonomy,” he said.
Sign up for Westpac IQ's monthly ESG Impact newsletter by subscribing to Sustainability
Stay informed with Westpac IQ
Get the latest reports straight to your inbox.
Related articles
Q4 2024 Sustainable Finance Market Update
Browse topics
Disclaimer
©2025 Westpac Banking Corporation ABN 33 007 457 141 (including where acting under any of its Westpac, St George, Bank of Melbourne or BankSA brands, collectively, “Westpac”). References to the “Westpac Group” are to Westpac and its subsidiaries and includes the directors, employees and representatives of Westpac and its subsidiaries.
Things you should know
We respect your privacy: You can view our privacy statement at Westpac.com.au. Each time someone visits our site, data is captured so that we can accurately evaluate the quality of our content and make improvements for you. We may at times use technology to capture data about you to help us to better understand you and your needs, including potentially for the purposes of assessing your individual reading habits and interests to allow us to provide suggestions regarding other reading material which may be suitable for you.
This information, unless specifically indicated otherwise, is under copyright of the Westpac Group. None of the material, nor its contents, nor any copy of it, may be altered in any way, transmitted to, copied of distributed to any other party without the prior written permission of the Westpac Group.
Disclaimer
This information has been prepared by the Westpac and is intended for information purposes only. It is not intended to reflect any recommendation or financial advice and investment decisions should not be based on it. This information does not constitute an offer, a solicitation of an offer, or an inducement to subscribe for, purchase or sell any financial instrument or to enter into a legally binding contract. To the extent that this information contains any general advice, it has been prepared without taking into account your objectives, financial situation or needs and before acting on it you should consider the appropriateness of the advice. Certain types of transactions, including those involving futures, options and high yield securities give rise to substantial risk and are not suitable for all investors. We recommend that you seek your own independent legal or financial advice before proceeding with any investment decision. This information may contain material provided by third parties. While such material is published with the necessary permission none of Westpac or its related entities accepts any responsibility for the accuracy or completeness of any such material. Although we have made every effort to ensure this information is free from error, none of Westpac or its related entities warrants the accuracy, adequacy or completeness of this information, or otherwise endorses it in any way. Except where contrary to law, Westpac Group intend by this notice to exclude liability for this information. This information is subject to change without notice and none of Westpac or its related entities is under any obligation to update this information or correct any inaccuracy which may become apparent at a later date. This information may contain or incorporate by reference forward-looking statements. The words “believe”, “anticipate”, “expect”, “intend”, “plan”, “predict”, “continue”, “assume”, “positioned”, “may”, “will”, “should”, “shall”, “risk” and other similar expressions that are predictions of or indicate future events and future trends identify forward-looking statements. These forward-looking statements include all matters that are not historical facts. Past performance is not a reliable indicator of future performance, nor are forecasts of future performance. Whilst every effort has been taken to ensure that the assumptions on which any forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The ultimate outcomes may differ substantially from any forecasts.
Conflicts of Interest: In the normal course of offering banking products and services to its clients, the Westpac Group may act in several capacities (including issuer, market maker, underwriter, distributor, swap counterparty and calculation agent) simultaneously with respect to a financial instrument, giving rise to potential conflicts of interest which may impact the performance of a financial instrument. The Westpac Group may at any time transact or hold a position (including hedging and trading positions) for its own account or the account of a client in any financial instrument which may impact the performance of that financial instrument.
Author(s) disclaimer and declaration: The author(s) confirms that (a) no part of his/her compensation was, is, or will be, directly or indirectly, related to any views or (if applicable) recommendations expressed in this material; (b) this material accurately reflects his/her personal views about the financial products, companies or issuers (if applicable) and is based on sources reasonably believed to be reliable and accurate; (c) to the best of the author’s knowledge, they are not in receipt of inside information and this material does not contain inside information; and (d) no other part of the Westpac Group has made any attempt to influence this material.
Further important information regarding sustainability-related content: This material may contain statements relating to environmental, social and governance (ESG) topics. These are subject to known and unknown risks, and there are significant uncertainties, limitations, risks and assumptions in the metrics, modelling, data, scenarios, reporting and analysis on which the statements rely. In particular, these areas are rapidly evolving and maturing, and there are variations in approaches and common standards and practice, as well as uncertainty around future related policy and legislation. Some material may include information derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information. There is a risk that the analysis, estimates, judgements, assumptions, views, models, scenarios or projections used may turn out to be incorrect. These risks may cause actual outcomes to differ materially from those expressed or implied. The ESG-related statements in this material do not constitute advice, nor are they guarantees or predictions of future performance, and Westpac gives no representation, warranty or assurance (including as to the quality, accuracy or completeness of the statements). You should seek your own independent advice.
Additional country disclosures:
Australia: Westpac holds an Australian Financial Services Licence (No. 233714). You can access Westpac’s Financial Services Guide here or request a copy from your Westpac point of contact. To the extent that this information contains any general advice, it has been prepared without taking into account your objectives, financial situation or needs and before acting on it you should consider the appropriateness of the advice.
New Zealand: In New Zealand, Westpac Institutional Bank refers to the brand under which products and services are provided by either Westpac (NZ division) or Westpac New Zealand Limited (company number 1763882), the New Zealand incorporated subsidiary of Westpac ("WNZL"). Any product or service made available by WNZL does not represent an offer from Westpac or any of its subsidiaries (other than WNZL). Neither Westpac nor its other subsidiaries guarantee or otherwise support the performance of WNZL in respect of any such product. WNZL is not an authorised deposit-taking institution for the purposes of Australian prudential standards. The current disclosure statements for the New Zealand branch of Westpac and WNZL can be obtained at the internet address www.westpac.co.nz .
Singapore: This material has been prepared and issued for distribution in Singapore to institutional investors, accredited investors and expert investors (as defined in the applicable Singapore laws and regulations) only. Recipients of this material in Singapore should contact Westpac Singapore Branch in respect of any matters arising from, or in connection with, this material. Westpac Singapore Branch holds a wholesale banking licence and is subject to supervision by the Monetary Authority of Singapore.
U.S.: Westpac operates in the United States of America as a federally licensed branch, regulated by the Office of the Comptroller of the Currency. Westpac is also registered with the US Commodity Futures Trading Commission (“CFTC”) as a Swap Dealer, but is neither registered as, or affiliated with, a Futures Commission Merchant registered with the US CFTC. The services and products referenced above are not insured by the Federal Deposit Insurance Corporation (“FDIC”). Westpac Capital Markets, LLC (‘WCM’), a wholly-owned subsidiary of Westpac, is a broker-dealer registered under the U.S. Securities Exchange Act of 1934 (‘the Exchange Act’) and member of the Financial Industry Regulatory Authority (‘FINRA’). In accordance with APRA's Prudential Standard 222 'Association with Related Entities', Westpac does not stand behind WCM other than as provided for in certain legal agreements between Westpac and WCM andobligations of WCM do not represent liabilities of Westpac. This communication is provided for distribution to U.S. institutional investors in reliance on the exemption from registration provided by Rule 15a-6 under the Exchange Act and is not subject to all of the independence and disclosure standards applicable to debt research reports prepared for retail investors in the United States. WCM is the U.S. distributor of this communication and accepts responsibility for the contents of this communication. Transactions by U.S. customers of any securities referenced herein should be effected through WCM. All disclaimers set out with respect to Westpac apply equally to WCM. If you would like to speak to someone regarding any security mentioned herein, please contact WCM on +1 212 389 1269. Investing in any non-U.S. securities or related financial instruments mentioned in this communication may present certain risks. The securities of non-U.S. issuers may not be registered with, or be subject to the regulations of, the SEC in the United States. Information on such non-U.S. securities or related financial instruments may be limited. Non-U.S. companies may not be subject to audit and reporting standards and regulatory requirements comparable to those in effect in the United States. The value of any investment or income from any securities or related derivative instruments denominated in a currency other than U.S. dollars is subject to exchange rate fluctuations that may have a positive or adverse effect on the value of or income from such securities or related derivative instruments.
The author of this communication is employed by Westpac and is not registered or qualified as a research analyst, representative, or associated person of WCM or any other U.S. broker-dealer under the rules of FINRA, any other U.S. self-regulatory organisation, or the laws, rules or regulations of any State. Unless otherwise specifically stated, the views expressed herein are solely those of the author and may differ from the information, views or analysis expressed by Westpac and/or its affiliates.
UK and EU: The London branch of Westpac is authorised in the United Kingdom by the Prudential Regulation Authority (PRA) and is subject to regulation by the Financial Conduct Authority (FCA) and limited regulation by the PRA (Financial Services Register number: 124586). The London branch of Westpac is registered at Companies House as a branch established in the United Kingdom (Branch No. BR000106). Details about the extent of the regulation of Westpac’s London branch by the PRA are available from us on request.
Westpac Europe GmbH (“WEG”) is authorised in Germany by the Federal Financial Supervision Authority (‘BaFin’) and subject to its regulation. WEG’s supervisory authorities are BaFin and the German Federal Bank (‘Deutsche Bundesbank’). WEG is registered with the commercial register (‘Handelsregister’) of the local court of Frankfurt am Main under registration number HRB 118483. In accordance with APRA’s Prudential Standard 222 ‘Association with Related Entities’, Westpac does not stand behind WEG other than as provided for in certain legal agreements (a risk transfer, sub-participation and collateral agreement) between Westpac and WEG and obligations of WEG do not represent liabilities of Westpac.
This communication is not intended for distribution to, or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. This communication is not being made to or distributed to, and must not be passed on to, the general public in the United Kingdom. Rather, this communication is being made only to and is directed at (a) those persons falling within the definition of Investment Professionals (set out in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”)); (b) those persons falling within the definition of high net worth companies, unincorporated associations etc. (set out in Article 49(2)of the Order; (c) other persons to whom it may lawfully be communicated in accordance with the Order or (d) any persons to whom it may otherwise lawfully be made (all such persons together being referred to as “relevant persons”). Any person who is not a relevant person should not act or rely on this communication or any of its contents. In the same way, the information contained in this communication is intended for “eligible counterparties” and “professional clients” as defined by the rules of the Financial Conduct Authority and is not intended for “retail clients”. Westpac expressly prohibits you from passing on the information in this communication to any third party.
This communication contains general commentary, research, and market colour. The communication does not constitute investment advice. The material may contain an ‘investment recommendation’ and/or ‘information recommending or suggesting an investment’, both as defined in Regulation (EU) No 596/2014 (including as applicable in the United Kingdom) (“MAR”). In accordance with the relevant provisions of MAR, reasonable care has been taken to ensure that the material has been objectively presented and that interests or conflicts of interest of the sender concerning the financial instruments to which that information relates have been disclosed.
Investment recommendations must be read alongside the specific disclosure which accompanies them and the general disclosure which can be found here. Such disclosure fulfils certain additional information requirements of MAR and associated delegated legislation and by accepting this communication you acknowledge that you are aware of the existence of such additional disclosure and its contents.
To the extent this communication comprises an investment recommendation it is classified as non-independent research. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and therefore constitutes a marketing communication. Further, this communication is not subject to any prohibition on dealing ahead of the dissemination of investment research.